Environmentally Counterproductive Support Measures in Transport: A CGE Analysis for Austria

European national policies involve a range of support measures to enhance the competitiveness of certain regions or products, inlcuding financial and institutional instruments. Some of these support measures involve environmentally counterproductive impacts. The question that rises in importance on the international agenda is how to reform these support measures, such that the original objective remains to be achieved, but the environmentally counterproductive impact can be lifted. The present paper first gives an overview on such support measures in the transport sector and ranks them with respect to their quantitative importance for the case of Austria. Second, the financial support measure of flat mileage tax deductability is selected for a more detailed quantitative analysis. A transport focused CGE SOE model is employed to quantify the economic impact of a reform of this instrument. Conclusions are sought as to how this reform can be achieved and what type and magnitude of macroeconomic feedbacks such a reform involves. This paper is based on an E3ME-sectoral CGE model of the Austrian economy, which has been expanded for six freight transport sectors and five passenger transport sectors in order to quantify the impacts of Environmentally Sustainable Transport for the such oriented OECD initiative. Current work expands this model further, focusing on financial interdependences between the transport sectors and the government as well as modal choice in passenger transport. JEL-Classification: C68, D58, R41, R48